In the late 1990s to early 2000s, dairy alternatives had not yet entered the mainstream vernacular. As Alex Hein, principal at Bright Green Partners, a global strategy consultancy focused on sustainable food, explained to an audience at Fi Europe 2024, people were “sceptical of dairy alternatives”.
Fast forward twenty-odd years and, while still making up a small segment of the market, consumers would be hard-pressed to not find alternative dairy options at a local supermarket or café.
According to the US Department of Health and Human Services, only one out of five US households in 2010 purchased plant-based milk alternatives. In 2023, this number increased to one in three households. In Europe, it’s a similar story, in 2024 the Good Food Institute (GFI) Europe reported that in the last year over 30% of households in Germany and the UK, and 40% in Spain purchased plant-based milk at least once.
Hein discussed this evolution by pointing to a picture of the inside of his fridge, full of various dairy and plant-based dairy alternative products. As he puts it: “[In the beginning] I didn't really like [...] animal-free alternatives to dairy. Now [...] I’m not only a dairy person. I love all of it for various reasons, [...] nutritional reasons, [...] sustainability reasons, [...] health reasons, I definitely like them all.”
Hein is not alone in his preferences. GFI Europe reported that between 2022 and 2023, there was an increase in plant-based milk and drink sales across six European countries, growing by 7.1% to reach €2.2 billion. Of the market share of all milk sales, plant-based milk alternatives comprised 4.6% of the market in France and 9.8% in Germany.
Will plant-based alternatives ever be able to compete with dairy's dominant market share?
Despite the increasing consumption, the market share for plant-based milk remains extremely small. “Compared to conventional dairy, it’s almost irrelevant in terms of market size,” Hein said.
To demonstrate this difference, Hein pointed to statistics on the estimated value of the global dairy market. In the 1990s, the global dairy market was valued at $111 billion, dairy made up over 99% of that ($110bn), while plant-based milk alternatives comprised 1 bn or less than 1%. By 2010, the market had almost quadrupled, valued at $407bn, with dairy dominating at 98% ($400bn), and alternatives comprising 2% ($7bn). In 2020 the market reached a cumulative $615bn, dairy again comprised 98% of the market ($600bn), and alternatives, 2% ($15bn).
Hein explained that by 2030, projections estimate that the market will be worth approximately $1,434bn, with dairy once again making up 98% ($1,400bn) of the market, and alternatives, 2% ($34 bn).
Dairy dominates the market, but at what cost to the environment?
While many people choose to consume dairy for its health benefits, environmental health is becoming increasingly important to consumers and companies alike.
In response to the 2016 Paris Agreement, an international climate change treaty, many large dairy companies have their sights set on the Pathways to Dairy Net Zero initiative, a global strategy targeting reduced greenhouse gas (GHG) emissions and a net zero status by 2050.
Dairy farming and production are linked with GHG emissions. Hein explained that in 2020 dairy production was responsible for around 900 million tonnes of CO₂ equivalent emissions. He added that this estimation is based on a conservative assumption that there is a one-to-one relationship between milk production and emissions. In other words, one kilo of CO₂ is emitted into the environment for every litre of cow’s milk produced.
Hein explained that even if methods are employed to reduce the number of GHG emissions per litre, the projected growth of the dairy market means that the totality of emissions is likely to remain high and the impact of such reduction methods would be minimal. “You reduce the intensity [of GHG emissions], but at the same time you have market growth, which are kind of equalling each other out,” he said.
Hein added that methods may be able to reduce emissions by around 10 – 40% per litre by the year 2040. However, this would suggest that between 60 – 90% of emissions currently produced would remain.
Cost of milk production: Traditional dairy vs plant-based vs precision fermentation
Producers of plant-based milk alternatives may have innovated over the years to create an alternative similar to dairy in terms of taste and texture, however, price parity remains a major hurdle.
While plant-based options make up only a small proportion of the European grocery market, a GFI analysis demonstrates that lower prices can boost their growth. GFI calls for policymakers and the food industry to continue investing in innovation and scale-ups to build a food system in Europe that is healthy, resilient, diversified, and helps the plant-based sector reach its potential.
Hein addressed this point, by pulling on data from Bright Green Partners 2040 EU Sustainable Dairy Landscape report, which compared the cost of goods sold (COGS) between dairy, plant-based milk alternatives, and dairy produced through precision fermentation. According to Bright Green Partners' definition, this does not include indirect costs such as marketing or R&D and any producer/retailer margins.
Hein explained that as of 2024, the COGS for producing one litre of cow's milk sits at €0.65, €0.70 for plant-based milk, and under €1 for precision fermentation dairy. However, projections for 2040, which account for 50% internalisation (accounting for the environmental costs such as carbon pricing and environmental regulations), the price parity dynamics would shift substantially and lean in favour of plant-based. The price of cow's milk would rise around 30% to €0.84 per litre, while plant-based milk’s increase would be smaller, sitting at around 10% and bringing costs up to €0.77.
A true cost projection, Hein explained, accounts for 100% internalisation, and would be €1.04 for cow’s milk, €0.85 for plant-based, and between €0.65 and €1.15 for precision fermentation.
This analysis points to the fact that as sustainability becomes more important for consumers and regulators, precision fermentation and plant-based milk alternatives may become more price-competitive with dairy.
Collaboration vital to achieve price parity between dairy and plant-based options
Price parity between dairy, dairy produced through precision fermentation, and plant-based milk alternatives will require economies of scale alongside governmental support to internalise environmental costs, Hein explained.
“Somebody has to bear the costs of improving the production process or reducing emissions, and the environmental impacts,” he said, explaining that that regardless of the reason, be those concerns about the climate, the environment, or one's pocket, this is “relevant to all of us”, and collaboration between industry, consumers, and governments is key.
Hein highlighted the importance of learning from observing how other industries tackled urgent issues. He drew parallels between the Covid-19 pandemic and the dairy industry. He explained that the timeline for producing Covid vaccines was extremely short, due to the urgency of the situation, and the collaboration between various industries. “Back then, in Covid, we felt the impact, because we were all locked at home... Right now, we are not locked at home, so everything feels all right,” he noted, adding that the environmental impacts of dairy do not “feel as critical”, but they are “in fact, also quite critical.”Hein called for major players in the dairy industry – companies, governments, and consumers – to collaborate and “find solutions to actually work together. As he put it: “I do believe that only together there is a way to solve the challenges that we have now.”